– 10/31/2010 –

“Protest works. Just look at the proof” – Yves Smith – It’s astonishing to see how Americans have been conditioned to think that political action and engagement is futile. I’m old enough to have witnessed the reverse, how activism in the 1960s produced significant advances in civil rights blacks and women, and eventually led the US to exit the Vietnam War.  I’m reminded of this sense of despair almost daily in the comments section. Whenever possible action steps come up, virtually without fail, quite a few will argue that there is no point in making an effort, that we as individuals are powerless. Americans have cultural norms that work against trying to move the political/social needle. Class and economic aspirations are one of them; protestors are by definition malcontents, and thus presumed losers. Busy successful people obviously have not reason to waste their time this way, right? I don’t buy that as a stance, particularly because trained passivity is a great, low cost way to hobble people who have been wronged. I mistakenly relegated an article by Johann Hari in the Independent on this topic to Links, and Richard Kline’s commentary on it made me realize it deserved its own post, so I am remedying that error now.

Jon Stewart’s Rally to Restore Sanity draws marchers from across America – At first glance it looked like any other demonstration of the type Washington DC had witnessed by the hundred over the decades. A huge stage soared over the National Mall on a sunny autumn day. Behind the giant speakers and the railings was the gleaming white Capitol building that houses Congress. But a few things were askew. "Restore Sanity" declared large words emblazoned over the stage in the red, white and blue colours always favoured by anyone with a political message in America. And of course the huge portraits of Stewart and Colbert – done up to echo the iconic Shepard Fairey image of Barack Obama – stared out bewilderingly over the masses. The crowd was enormous – easily a quarter of a million people. As the masses listened to music and comedy routines broadcast from the tiny distant stage over giant screens all the way down the Mall, it was an impressive display of the power of comedy and celebrity. Whether it was a display of the power of American liberalism was much harder to say. Many observers saw the rally as a response to Fox News pundit Glenn Beck’s recent "Restoring Honour" rally, which occupied the same space several months ago. That event, which attracted between 250,000 and 500,000 people, was seen as symbolising the rising power of conservatism.


Can I Buy a House without Speculating ? – The solution, in theory, is the Case-Shiller house price index. You can roughly hedge the price of a house you own using the index. The problem is that the risk you want to hedge is that you want to sell the house and it is cheap. So long as you own the same house, the price only matters for property tax assessments. Shiller really really honestly believed that he had made the world a much better place when he confinced the Chicago Commodities board to introduce trading in the index. But then almost no one traded it (what if you held an index and nobody came ?).  I think that the correct innovation which will really fix things is one in which the balance of a mortgage is indexed to the Case-Shiller index. If the index were perfectly matched to your home, your equity in the house would just grow with repayments minus interest. Oh the interest to be paid would be constant (OK indexed to wages or the CPI to be perfect), not a constant times the balance owed. So, to the extent that the index worked, interest and principle payments and equity in the house wouldn’t depend on housing price fluctuations.

Americans are voting on the wrong information – Even the Washington Post knows it–a new Bloomberg poll shows that Americans have wrong information about the Obama Administration’s record.   see Americans Don’t Know, Oct, 29 2010.  They mistakenly think taxes have increased (they haven’t–they’ve gone down), that the TARP money won’t ever be repaid (most of it already has been, and the bailout amounts still at risk are those used to bolster mortgage lenders); and that the economy is worse off because of the stimulus (not so–more than a million more jobs would have been lost without the stimulus, and many important public priorities have been funded). The Obama administration has cut taxes — largely for the middle class — by $240 billion since taking office Jan. 20, 2009. A program aimed at families earning less than $150,000 that was contained in the stimulus package lowered the burden for 95 percent of working Americans by $116 billion, or about $400 per year for individuals and $800 for married couples. Other measures include breaks for college education, moderate- income families and the unemployed and incentives to promote renewable energy.
Abolition of the Corporate Income Tax -Megan McArdle has a good post on her case for abolishing the corporate income tax. I say "good," not "excellent," because, in the midst of a comprehensive though succinct analysis, she doesn’t get the issue of incidence correctly. She starts out fine, pointing out that the legal incidence–who pays the tax–is different from the economic incidence–who ultimately bears the burden. But then she doesn’t pursue that and writes as if she thinks that shareholders bear the burden. We don’t know for sure who bears the burden but the larger the elasticity of the supply of capital to the United States, the lower is the percent of the burden borne by shareholders. See Harvey Rosen’s and Ted Gayer’s Public Finance text for a nice discussion of that. The entry in the Concise Encyclopedia is a nice discussion but doesn’t mention the international mobility of capital, which is a good bit higher than it was when many of the burden studies were done in the 1960s and 1970s.

The Chamber of Commerce Is the International Cosmopolitan Elite – Barbara Kiviat has noted that the U.S. CoC should not be thought of as representing American business interests, but rather international interests. Her conclusion is entirely correct, and is also entirely consistent with the U.S. Chamber of Commerce’s self-description. The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations. More than 96% of U.S. Chamber members are small businesses with 100 employees or fewer. Note the noun "world". Now compare with the description from "Cosmopolitanism" in the Stanford Encyclopedia of Philosophy: Marx and Engels tagged cosmopolitanism as an ideological reflection of capitalism. They regard market capitalism as inherently expansive, breaking the bounds of the nation-state system, as evidenced by the fact that production and consumption had become attuned to faraway lands. In their hands, the word ‘cosmopolitan’ is tied to the effects of capitalist globalization, including especially the bourgeois ideology which legitimatizes ‘free’ trade in terms of the freedom of individuals and mutual benefit…For direct quotes from Marx on free trade, see here.

The GDP Story: Final Demand Grew Just 0.6 Percent – Come on folks, we had the second largest inventory build-up in history. Pull that out and final demand grew at just a 0.6 percent annual rate. Does anyone thing that inventories will continue to grow at this rate? This means that instead of adding to growth inventories will subtract from an economy that has no almost no forward momentum. This is all GDP accounting 101. This should be the headline on the 3rd quarter numbers.

For-Profit Schools, Tested Again – LAST week was challenging for the Apollo Group, the big for-profit education company that runs the University of Phoenix, Western International University and other institutions. One reason is that the Obama administration instituted new rules barring pay-for-enrollment deals among student recruiters at for-profit colleges — a development that is likely to cause significantly lower enrollment levels at Apollo and its peers. But last week also brought a disclosure from Apollo that the Securities and Exchange Commission had requested information about the company’s insider trading policies relating to stock sales made by some of its top officials in 2009. The sales the S.E.C. is focusing on occurred around the time that the Department of Education was asking questions about the University of Phoenix’s policies relating to money it receives under the federal government’s Title IV financial aid programs.

The Grand Old Plot Against the Tea Party – But whatever Tuesday’s results, this much is certain: The Tea Party’s hopes for actually affecting change in Washington will start being dashed the morning after. The ordinary Americans in this movement lack the numbers and financial clout to muscle their way into the back rooms of Republican power no matter how well their candidates perform.  Trent Lott, the former Senate leader and current top-dog lobbyist, gave away the game in July. “We don’t need a lot of Jim DeMint disciples,” he said, referring to the South Carolina senator who is the Tea Party’s Capitol Hill patron saint. “As soon as they get here, we need to co-opt them.” It’s the players who wrote the checks for the G.O.P. surge, not those earnest folk in tri-corner hats, who plan to run the table in the next corporate takeover of Washington. Though Tom DeLay may now be on trial for corruption in Texas, the spirit of his K Street lives on in a Lott client list that includes Northrop Grumman and Goldman Sachs.

Money Woes Can Be Early Clue to Alzheimer’s – It turned out that Mr. Packel was developing Alzheimer’s disease and had forgotten how to handle money. When she tried to pay their bills, Mrs. Packel, who enlisted the help of a forensic accountant, could not find most of the couple’s money. “It just disappeared,” she said.  What happened to the Packels is all too common, Alzheimer’s experts say. New research shows that one of the first signs of impending dementia is an inability to understand money and credit, contracts and agreements.  It is not just families who are affected — financial advisers and lawyers say they are finding themselves in a bind when their clients’ minds seem to be slipping.

‘The middle class has lost track of how poor this country is’ (India) Much like the Mahatma Gandhi National Rural Employment Guarantee Act in the first term of the United Progressive Alliance, the Food Security Act was its most ambitious social welfare programme. Since discussions on the Act in the National Advisory Council began, its provisions have consistently been diluted under attempts by the government to narrow its scope and vision. The draft Bill, submitted last week by the NAC to the government, falls way short of its promise. This prompted Jean Dreze to call it a “minimalist programme” and ask: why not food security for all? Excerpts from an interview in which the development economist and author explains how the government is reneging on its commitment to the poor:

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